With AI Demand Surging, TSMC Wields Pricing Power to Defend Margins
Published on 07/08/2026 at 16:13 | Redaktion boerse-global.de
Taiwan Semiconductor Manufacturing Co. heads into its July 16 second-quarter earnings report armed with a potent combination: surging demand for advanced chips and the pricing muscle to protect profits. While the stock has retreated roughly 10% from its July high amid a broader semiconductor sell-off, it remains up nearly 39% year to date, recently changing hands around 379 euros. The underlying narrative, however, is far from a simple growth story.
Wall Street expects Q2 earnings per American depositary receipt of $3.81, up sharply from $2.47 a year ago, on revenue of roughly $40 billion. JPMorgan projects the company’s gross margin will approach 70% for the period, while Citi has lifted its target price to 3,800 New Taiwan dollars, citing insatiable appetite for AI chips. Customers are now ordering not only standard graphics processors but also custom network chips tailored to artificial intelligence workloads.
Yet a trio of margin headwinds looms over the second half. The ramp-up of 2-nanometer production will initially drag gross margins by up to three percentage points. Overseas factories, particularly the massive complex in Arizona, are expected to shave another three points off margins in 2026, with the drag potentially growing in later years due to higher operating costs and limited economies of scale. Geopolitical tensions in the Middle East are also pushing up the price of key chemicals and raw materials.
Should investors sell immediately? Or is it worth buying TSMC?
TSMC’s response is characteristically bold: leverage its 72% share of the global foundry market to raise prices aggressively. By year-end, the cost of 3-nanometer wafers will jump 15%. The upcoming 2-nanometer generation will be even pricier, with a single wafer costing nearly $30,000. Analysts estimate this pricing offensive alone could boost earnings per share by more than 10%.
The company is simultaneously pouring capital into capacity at a historic pace. Management has set a 2025 capex budget of up to $56 billion, with expectations that could rise to $80 billion next year. Much of this goes into cutting-edge 3- and 2-nanometer fabs, as well as advanced packaging technologies essential for modern AI infrastructure.
Global expansion is accelerating. Taiwan’s Ministry of Economic Affairs in early July approved an additional $20 billion injection into TSMC’s Arizona subsidiary, raising the total authorized budget for U.S. facilities to $44 billion. Construction of the second fab, which will produce 3-nanometer chips, concluded in April, and ground has been broken for a third facility.
Investors will also be watching for updates on emerging technologies such as glass-core substrates. Goldman Sachs expects that material won’t see standard industrial adoption until 2030, but any concrete partnership announcements with firms like Innolux or Ibiden could provide fresh momentum for the stock. For now, the market’s focus remains on whether TSMC can translate its pricing power and capacity expansion into sustained margin resilience amid rising cost pressures.
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